Multiple choice

A car loan is offered at 8% annual interest, compounded annually. After the first year, the interest due is $240. What is the principal on the loan?

  1. $ $2400$
  2. $ $3000$
  3. $ $4200$
  4. $ $3500$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Interest = Principal * Rate * Time. 240 = P * 0.08 * 1. P = 240 / 0.08 = 3000.

AI explanation

Using the compound interest formula for the first year, the interest is calculated as Principal multiplied by the annual interest rate. We set up the equation as Principal times 0.08 equals 240. Solving for the principal gives 240 divided by 0.08, which results in $3000.

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